Loop Capital analysts reduced the price target on Leslie’s (NASDAQ:LESL) to $3 from $6 while keeping a Hold rating on the stock.
The analysts remarked that Leslie’s issued a negative pre-announcement ahead of its third-quarter 2024 results, primarily attributing the downturn to poor weather and ongoing softness in big-ticket repairs and replacements (R&R) sales. As a result, shares plunged more than 30% yesterday.
The analysts noted that Pool Corporation had similarly pre-announced negative results about three weeks prior, and channel checks earlier in the quarter had indicated ongoing challenges, making it reasonable to expect a pre-announcement from Leslie’s as well. However, the extent of the guidance reduction for both the quarter and the full year was more severe than anticipated.
The company’s implied fourth-quarter guidance suggests that sales softness will continue, regardless of weather conditions, and there will be limited gross margin recovery despite the favorable comparison to the previous year’s inventory de-stocking period. The analysts pointed out that visibility into a return to normal growth remains limited due to persistent underlying challenges following the pandemic’s substantial pull-forward effects. Additionally, Leslie’s faces an unusually high leverage ratio.